Tokyo – Q4/2022
MARKETINMINUTES
Savills Research

Residential Leasing

Savills team
Please contact
us for further
information
JAPAN
Christian Mancini
CEO, Asia Pacific(Ex Greater China)+81 3 6777 5150
cmancini@savills.co.jp

RESEARCH
Tetsuya Kaneko
Managing Director,
Head of Research &Consultancy, Japan+81 3 6777 5192
tkaneko@savills.co.jp

Strong demand paradoxically corrects rents
The 23W saw listed rental corrections, but paradoxically, this is probably asign of strong leasing demand.
•A verage rents in the Tokyo 23 wards (23W) saw a notabledecline of 2.9% quarter-on-quarter (QoQ) and 0.7% year-onyear (YoY) to JPY3,933 per sq m, although this is likely due
to strong leasing demand taking up many newly completed
premium units from the market.
•R ents in the central five wards (C5W) moved in tandem,
decreasing 2.6% QoQ likely due to the same reasons, but
remain higher 0.4% YoY.
•T he C5W premium grew to 20.0%, up 1.8 percentage points(ppts) from last year, and still exceeds the pre-pandemic level.
•S uginami saw the largest gain of 2.1% on a quarterly basis, while
Chiyoda saw the largest decline of 4.5% QoQ. However, it should
be noted that Chiyoda also saw a large gain in the previous
quarter, and that rents are still higher than one year ago.
• A fter narrowing slightly in the previous quarter, the premiumfor the 45-60 sq m size band widened again this quarter.
• The average occupancy rate in the 23W rose by 0.1ppts fromthe previous quarter to 96.6%, while that of the C5W rose by
0.2ppts to 96.2%.
• I n the short term, the return of foreign nationals will likely leadto continued moderate net population growth in the 23W andsupport rental demand.
savills.co.jp/insight-and-opinion/“While average rents declined
across the 23W, this is
likely due to strong leasing
demand taking up many
newly completed premium
units. Indeed, occupancy has
increased, and the populationof the 23W has continued tosee monthly growth, mostly
supported by the returnof foreign nationals. This
temporary correction should
be proof of strong demand
as well as a necessary step for
further growth.”
SAVILLS RESEARCH & CONSULTANCY

1

Yoshihiro Kanno
Senior Manager,
Research & Consultancy+81 3 6777 5275
ykanno@savills.co.jp
Simon Smith
Regional Head of
Research & Consultancy,
Asia Pacific+852 2842 4573
ssmith@savills.com.hk
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Residential Leasing

MAP 1: Tokyo’s 23 Wards by Survey Area

Adachi

Itabashi
Kita
NerimaKatsushika
Arakawa

ToshimaNakanoBunkyoTaito

SumidaShinjuku

Suginami

Edogawa

ChiyodaShibuya

Chuo

Koto

MinatoSetagaya
MeguroShinagawaTokyo 23 Wards
Central (C5W)
South

Ota

West
North (Inner)
North (Outer)
East (Inner)
East (Outer)

Source Savills Research & Consultancy

SURVEY GEOGRAPHY
In order to illustrate trends in the central Tokyo
residential market, Savills has segmented
Tokyo’s 23 wards (23W) into seven distinct
geographical areas: Central (or “central fivewards”), South, West, North (Inner and Outer)and East (Inner and Outer).

In contrast to the luxury residential market,
advertised or “asking” rents for mid-market
units fitting the above criteria are typically
non-negotiable and are not subject toincentives such as rent-free periods. Savills
mid-market rental indices are therefore
considered to closely reflect movements incontract rents for the Tokyo market.

RENTAL INDEX DATACHARACTERISTICS
Savills collates thousands of leasing comparables
each quarter in order to analyse trends affecting“mid-market” rental apartment units in Tokyo.
Our benchmark rental data is based on averageadvertised monthly rents for units which fit thefollowing criteria:

OVERALL RESULTSIn Q4/2022, rents saw a notable decline
across the Tokyo 23W, following soundincrements in the previous quarters. While
the rental growth seen in the previous
quarter appears to have stemmed froma large increase in the number of newly
constructed units with above average rents,
especially in the C5W, strong leasing demandin Q4/2022 seems to have paradoxicallyresulted in a contraction of average listed
asking rents. Indeed, as normalcy returns
and demand, particularly from overseas
residents, picks up, many of those newly
completed premium units from the recent
quarter have been taken up, while a belowaverage number of new units have arrived tothe market. Although a contraction in asking
rents might appear to be a cause for concern

1) studio and one- or two-bedroom rental
apartments of up to 100 sq m in size,2) reinforced concrete structures built within
the last ten years, and
3) properties located in Tokyo’s 23 wards andsituated within a ten-minute walk of the nearest
station.
savills.co.jp/insight-and-opinion/2

at first glance, the contraction this quarteris more likely a positive demonstration of arecovery in leasing demand in the 23W fromthe difficult situation during the pandemic.
The 23W has continued to see positive
population growth between September andNovember 2022, in contrast to the same
periods in 2020 and 2021 which saw the
population decline. Like the previous quarter,
this growth was mostly supported by a sizable
increase in the foreign national population,
which increased by about 16,000 people.
On the other hand, the Japanese populationof the 23W shrank by around 8,000 people.
Overall, while the population of the 23W
increased by 8,000 people, the number ofhouseholds increased by 12,000 over thesame period. This suggests that a majorityof those moving out of the 23W are families,
while many singles, both Japanese andnon-Japanese, are moving in. Overall, thisincrease in population, and increase in thenumber of households is a strong sign for the
23W residential market, which traditionallycatered to single-occupier households.
The number of available listings has
declined by more than a third - a notable
drop from the previous quarter. Whentaking this into consideration with therental decline observed, this suggests thatthe demand for quality units has likely seena robust increment. In conjunction with the
population that is likely to continue growing
moderately over the next few months on theback of foreign nationals moving to Japan,
overall residential demand should provestrong.
MID-MARKET RENTAL TRENDS BYSURVEY AREA
Average mid-market asking rents in Tokyo’s
23W are currently at JPY3,933 per sq m,having declined by 2.9% QoQ. However, it
should be noted that a large number of newly
constructed units with above-average rents
contributed to the increment in the previous
quarter, and it appears that many of theseunits have been leased throughout the fourth
quarter. Indeed, on an annual basis, thistranslates to a more modest decline of 0.7%.
Moreover, most submarkets in the Tokyo
23W have seen some positive net migration,
primarily due to the relaxation of entry
restrictions in 2022, which has contributed toa rebound in rental demand and a decrease in
the number of available units. Furthermore,with hybrid working arrangements
commonplace in Tokyo, there has been
particular interest in larger units that canaccommodate home offices. Overall, Tokyo’s
demographic situation currently appears to
be stable and improving, and the influx offoreign nationals should more than offset thenatural decline of the Japanese population,and see a net increase in the 23W population forthe meantime. However, investors should pay

Residential Leasing

GRAPH 1: Mid-market Apartment Rental Index,
Q3/2008 to Q4/2022
Tokyo 23 ward average
Central five wards
4 period Mov. Avg. (Tokyo 23 wards)
4 period Mov. Avg. (Central five wards)

RENTAL INDEX, Q3/2008 = 100

115
110
105
100
95
90

Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q4

85
08 09 101112

13 14 15 16 17

18 19 20 21 22

Source Savills Research & Consultancy

GRAPH 2: Rental Premiums/Discounts* vs 23W
Average, 2017 to Q4/2022
2017

2018

2019

2020

C5W

South

North
East
(Inner) (Inner)

2021

2022

PREMIUM / DISCOUNT TO 23W AVERAGE

25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
-30%
West

North
East
(Outer) (Outer)

Source Savills Research & Consultancy* The above represents the average premium/discount over therespective year.

GRAPH 3: Mid-market Apartment Rents,
Q1/2014 to Q4/2022
Tokyo 23 Ward
West
East (Inner)
5,000

Central 5 Wards
North (Inner)
East (Outer)

South
North (Outer)

4,750
JPY / SQ M / MONTH

4,500
4,250
4,000
3,750
3,500
3,250
3,000

Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4

2,750
2,500

2014

2015

2016

2017

2018

2019 2020

2021

2022

Source Savills Research & Consultancy

savills.co.jp/insight-and-opinion/

attention to demographic shifts going forward.
Average asking rents in the C5W submarket
have contracted by 2.6% QoQ, but grew 0.4%
YoY, and are currently at JPY4,731 per sq m. Allconstituents experienced rental corrections
on a quarterly basis. Looking at the ward level,
Chiyoda experienced the largest change,
decreasing by 4.5% QoQ, while other wards had
milder declines ranging between 1.3% and 3.3%.
The C5W experienced the second largest net
migration of the Tokyo submarkets between
September and November, with a net inflow
of 3,100 new residents, most of whom areforeign nationals. This has led to a significant
decline in the number of available units in all
wards in the submarket. Furthermore, thesubmarket typically attracts high income
earners. Hence, many larger units with highrental levels have been taken off the market,
which has caused some noticeable downward
movement in average asking rents.
The South submarket also saw acontraction in average rents this quarter,
but this was more moderate at 1.5% QoQ,
with rents falling to JPY4,090 per sq m.
Although the submarket experienced aslight net population contraction between
September and November, the expansion indemand from young, single professionals,
both Japanese and non-Japanese, for single
units has resulted in a notable drop in theavailable unit count. Hybrid work styles arecommonplace in Tokyo, and units that canfacilitate working from home arrangements
remain popular. Similar to the C5W, demandhas been strong for large, premium units thisquarter, leaving a higher proportion of lessexpensive and smaller units available on themarket, which makes our rental indices looksomewhat weak, though the reality appears tobe the opposite.
Average rents in the Inner North submarket
experienced a moderate contraction of 2.2%
QoQ to JPY4,118 per sq m, which amounts
to a slight yearly increment of 0.5%. Averagerents in the more expensive Bunkyo sit 2.3%
higher than Q4/2021, but declined 2.8% QoQ.
Toshima also saw a moderate decline in asking
rents by 1.6% QoQ, which translates to a yearly
decline of 1.2%. Indeed, both constituent wards
attracted a net influx of people, primarily
supported by foreign nationals. Hence, thesubmarket saw a drop in the number ofavailable units by almost half QoQ in Bunkyo,
and nearly a quarter in Toshima. Demand fromthese new residents has helped to absorb the
newly constructed units with expensive rents
in the submarket, as well as other larger units
that can facilitate hybrid work, which has led tothe overall contraction in average submarket
asking rents. The Inner North submarket will
likely continue to attract new residents due to
its many entertainment offerings in Ikebukuro
and close proximity to the C5W submarket.
The Inner East submarket experienced asimilar trend, and average asking rents fell by

3

2.4% QoQ to JPY3,784 per sq m which is a YoY
contraction of 2.2%. As this report discusses
in further detail in a later section, the Inner
East was the only submarket in the Tokyo 23W
to experience yearly population increments
throughout the pandemic. Demand may
continue to grow going forward in the Inner
East submarket, which, like the Inner North,
has convenient access to the C5W at a more
affordable rental level.
The West submarket is considered a
popular residential area, and too has attracted
a moderate net positive influx of migrants
in Q4/2022. The West also experienced amild contraction in average asking rents toof 0.1% QoQ to JPY3,710 per sq m. Suginami
and Nerima saw the largest quarterly rental
increments in the Tokyo 23W at 2.1% and 0.9%,
respectively. However, asking rents in Nakano
fell by 3.1% QoQ, largely due to a significant
drop in the availability of expensive units in
Q4/2022, which caused average submarketlevel rents to trend downwards. Indeed,demand has been strong since the onset of thepandemic in the West, as people seek goodaccess to offices in the C5W along the Chuoline, but also require more space for homeoffices. The West submarket should continue
to perform well and attract migration due to its
convenience and entertainment offerings forresidents.
Average rents in the Outer North submarket
were the only ones to see positive growth thisquarter, increasing 0.2% QoQ to JPY3,435
per sq m, and still feature the second lowest
average asking rents in the 23W. At the ward
level, Itabashi saw rents stay flat, and remains
one of the cheapest wards in the Tokyo 23W
for renters. Rents in Kita increased by 0.3%
QoQ, which is likely due to a large proportionof newly completed units having been rented
throughout Q4/2022. The Outer North
experienced a net influx of over 1,400 new
residents between September and November,which has fueled some expansion in demand
for residential units. The relative affordabilityof the submarket will likely be attractive
to movers and should sustain some rental
demand going forward.
The Outer East submarket has consistently
offered the most affordable rents in theTokyo 23W market, and rents declined
further over the quarter. Average asking
rents were JPY3,213 per sq m in Q4/2022,
having contracted by 2.7% QoQ and 1.3%
YoY. The submarket attracted a net 2,400
new residents between September andNovember, with notable migration taking
place in Adachi and Katsushika. Arakawa
experienced the largest contraction in asking
rents at 4.2% QoQ. The Outer East submarket
will likely retain its popularity among mostdemographics due to its relative affordability
and the availability of living space.

Residential Leasing

GRAPH 4: Average Occupancy for J-REIT Residential
Assets, Q1/2016 to Q4/2022*
23-ward average
South
East

100%

Central 5 wards
North & West

98%

96%

94%

Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4

92%
2016

2017

2018

2019

2020

2021

2022

Source Savills Research & Consultancy based on publicly disclosed
J-REIT property data
* Q4/2022 is as of November 2022.

GRAPH 5: Rents by Unit Size, C5W, Q1/2014 toQ4/20225,200

15-30 sq m

30-45 sq m

45-60 sq m

JPY / SQ M / MONTH

5,000
4,800
4,600
4,400
4,200

OCCUPANCY RATES
Occupancy rates in the Tokyo 23W improved
slightly again this quarter to 96.6%,
increasing 0.1ppts QoQ. Overall, occupancy
levels are high, although they are still slightly
lower than the high levels observed before
the pandemic. Nonetheless, they have been
gradually improving since the pandemic has
progressed to an endemic state. Specifically,
occupancy rates in Tokyo 23W are 0.5ppts
higher than the same period in 2021, and0.8ppts higher than in 2020.
Occupancy rates in the C5W observed asimilar trend, increasing 0.2ppts over thequarter to 96.2%. Likewise, they have also
improved over the past two years, and are
0.6ppts and 1.8ppts higher than the same
period in 2021 and 2020, respectively.
Meanwhile, occupancy rates in the Southsaw a slight downtick over the quarter, while
the North and West saw a slight uptick. The
East also saw a slight downtick, after the large
increment in the previous quarter.
Going forward, occupancy rates should
remain stable as the population of the 23W
should continue to grow on the back of someforeign nationals moving to Japan. Indeed, thehigh occupancy rates of J-REIT properties andquick absorption of new units on the market
suggest that there is greater demand for quality
units in the 23W. Nonetheless, remote work
policies will likely remain in place, and this will
have an effect on residential choices as somemight feel less need to move to more central
locations, especially with the inflationary
environment present. Overall, while the market
should improve steadily, it may not reach therecent peak observed in 2020 soon.

4,000

Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4

3,800
2014

2015

2016

2017

2018

2019 2020 2021

2022

Source Savills Research & Consultancy

GRAPH 6: Domestic Net-migration into the Inner East
Submarket, 2019 to 2021

CHANGE IN THE NUMBER OF PEOPLE

2019

2020

2021

6,000
5,000
4,000
3,000
2,000
1,000
0
-1,000-2,000-3,000C5W

Greater
23W
Tokyo(excluding Prefecture Tokyo
C5W) (excluding
23W)

Rest ofJapan

Source Ministry of Internal Affairs and Communications,
Savills Research & Consultancy

savills.co.jp/insight-and-opinion/

RENTS BY UNIT SIZETokyo’s rental market is principally made up ofcompact single-occupier units, typically lessthan 45 sq m (13.6 tsubo) in size. Such units
can often make up as much as 75% or moreof the 23W area’s rental listings. Unlike othermajor global cities such as London and New
York, house or apartment sharing does notform a major segment of the rental market.
As a result, there is a large, stable market forsmall- to mid-sized units.
Smaller size bands in the C5W experienced
some contraction in Q4/2022. Rents in the 15-30
sq m size band, which comprises the majority ofrental units in the C5W market, fell moderately
this quarter, decreasing by 1.2% QoQ. Rents
declined more in the larger 30-45 sq m size
band, by 2.9% QoQ. Meanwhile, the largest
45-60 sq m size band moved in the opposite
direction, seeing an increase of 1.7% QoQ.
Overall, this relative scarcity of units in thislarger size band has allowed it to maintaina premium over smaller counterparts asremote work remains prevalent.
The C5W has attracted the largest levelof migration into the submarket among the
23W submarkets over the fourth quarter. The

4influx of foreign nationals has driven thispopulation increment in all wards across theC5W, and Shinjuku and Minato have been themost popular wards for movers. High income
earning professionals should continue to drive
demand for larger units going forward, which
will continue to perform well due to relative
scarcity. That said, inflation is still a pertinentissue for average households, and many might
still be hesitant to move to the central wards,
instead seeking more affordable alternatives
in nearby submarkets.
INNER EAST SUBMARKETThe Inner East submarket offers various
cultural and entertainment options, as well
as being a popular residential district. In prepandemic times, the Inner East submarket
typically attracted movers from nearby
prefectures as well as from within Tokyo. The
submarket offers convenient access to the
C5W through several JR and metro lines, and isoften considered a more affordable alternative
to living in Chuo or Chiyoda, and is therefore
especially popular among young professionals.
Indeed, as Graph 6 demonstrates, the Inner
East submarket experienced an uptick inmigration from the C5W from 2020, with someformer residents of the C5W likely looking tomove out due to more prolific remote work.
The allure of the Inner East has endured
among renters throughout the pandemic,
and its constituent wards, Koto, Sumida, andTaito have seen their total populations growby 5,900, 4,900, and 5,500 people, respectively
since the peak population of the 23W in May
2020, according to data from the Ministry ofInternal Affairs and Communications. Overall,
the population of the Inner East submarket
increased by 1.6% between May 2020 andNovember 2022, which was the largest relative
and absolute increment among the constituent
submarkets of the 23W. In fact, the Inner
East was the only submarket in the 23W thatexperienced positive net-migration consistently
throughout the pandemic, which demonstrates
the robustness of leasing demand in thesubmarket.
Although the Inner East continued to attract
new residents over the course of the pandemic,
we observed a notable demographic shift from2020. Much like the South submarket (pleaserefer to our Residential Briefing Q2/2022),
the Inner East wards appear to be losing theirappeal among young families, and there has
been a notable outflux of residents in the 0-to9-year-old, 30-to-39-year-old, and 40-to-49year-old age brackets since 2022. Indeed,
many in these age brackets have migrated
away from the Inner East to outlying
prefectures that retain convenient transport
links to the C5W, such as Chiba, Saitama, andKanagawa, probably in search of larger units
that can facilitate hybrid work at cheaperrental levels, as well as greater outdoor spacesuitable for raising children.

Residential Leasing

GRAPH 7: Inner East Wards Net Migration of Different
Age Groups, 2020 to 2021
2020

2021

CHANGE IN THE NUMBER OF PEOPLE

12,00010,000
8,000
6,000
4,000
2,000
0
-2,000-4,000-6,000<20 years old

20-29

30-64

>64 years old

Source Ministry of Internal Affairs and Communications,
Savills Research & Consultancy* These population changes do not include natural attrition (newbirths and deaths).

However, this outflow has been more than offset by an outsized
increment in the 20-to-29-year-old age bracket. Indeed, theappeal of the Inner East submarket endures among younger
single people who require less space than those in other age
brackets, particularly due to its proximity to the C5W and theavailability of units below the Tokyo 23W average rental level.
With young professionals composing a greater proportionof residents in the submarket, the number of single-personhouseholds has increased over the past few years.
With normalcy coming back, business confidence and hiring
activity has received a boost and all of Tokyo’s constituent
submarkets are starting to see some population recovery. The
Inner East submarket experienced the largest overall population
growth throughout the year, and has also successfully beensavills.co.jp/insight-and-opinion/

attracting foreign nationals into the submarket,
with over 7,000 new entrants coming fromoverseas. With strict border measures on entry
to Japan by foreign nationals having been lifted,
Tokyo’s international population is expected tocontinue to grow over the coming year, and thepositive qualities of the Inner East submarket
will likely be a major draw to new residents.
As such, a growing non-Japanese population
will likely further supplement the population
growth in the submarket, which should help
drive residential leasing demand over the
coming years.
OUTLOOKThe Tokyo 23W residential market experienced
a noteworthy shift in Q4/2022, and all
constituent submarkets experienced somerevision in asking rents. Many observers might
be concerned by this sudden contraction
across the 23W, but this is instead more likely
an indication of positive sentiment and a signthat the Tokyo residential market is on track
for further growth. Indeed, occupancy has
experienced a consecutive quarterly improving,showing that the market has broad and sounddemand.
This rapid fluctuation is grounded in a recent
demographic trend, namely an influx in the
non-Japanese population in Tokyo triggeredby the easing of border restrictions. Most
submarkets experienced a population decline
throughout the pandemic as many residents
sought larger or cheaper space outside the 23W,
and foreign nationals were unable to enter
Japan. However, the tides have changed as mostsubmarkets saw their populations increase
between September and November 2022, and5

the demand for premium units with aboveaverage rents appears to have paradoxically put
downward pressure on average “listed” asking
rents. Hence, the residential market appears
to have demonstrated sound demand thisquarter.
In the short-term, the return of foreign
nationals will likely lead to further moderate
net population growth in the 23W, whichshould support sound rental demand.
However, the 23W still faces competition
from outer prefectures that can offer more
affordable rents, especially as residents inJapan face heightened costs of living due to
inflation. Furthermore, hybrid workstyles
are common in Tokyo. Therefore, many
residents may remain reluctant to move tothe 23W for the meantime. That said, the C5W
may perform well in spite of the inflationarypressure, given the typically high-income
status of residents in these submarkets whowill be less affected.
Overall, economic conditions, wage
growth, and demographic changes will
primarily dictate the pace of the recovery of
the 23W residential market going forward.
Indeed, the Japanese economy looks to farebetter in 2023 due to its belated opening.
Meanwhile, although more companies are
expecting greater office attendance, many
hybrid work policies are in place, whichmight slow the recovery of demand in the
23W somewhat. Going forward, with thedecreasing number of available units in themarket, accompanied with the increasing
population and consequently, leasing
demand, rental levels are expected to pick up
again soon.